Saturday, August 13, 2011

Armageddon: Part II

The United States economy is large and complicated. Like everything else, it can fail. Like in politics, economic failure has two extremes. On one hand, depression would cause the economy to actually shrink and prices to fall. Money actually gains value. This can theoretically be corrected by spending. The other extreme is hyperinflation that results from excess printing of money. Money loses value rapidly and the barter system begins to flourish again. This is because hard items retain value and currency does not. This is what happened in Germany in the 1920s’ and in numerous other countries since. It has not happened to a first world economy since World War II. Hyperinflation is by far the more likely event between these two.

The United States has been on a spending spree the like which has never been seen before by mankind. A potential stabilizing force is that the size of today’s worldwide population and economy dwarfs all past similar situations. The one thing that does not change is Human nature. We will fight over scarce resources. Unless the fundamental structure of the economy of the United States is CHANGED to allow free enterprise to work its magic, we cannot expect anything but a severe correction in the world wide economy. Particularly felt by the United States. This will lead to open warfare somewhere along the line. Even though the U.S. is nowhere near the domination of the past, it is still the largest single economy. Worldwide implications are magnified in particular spots that will reach the point of desperation enough to trigger organized violence. It is preventable, but in the political world of today, it is unlikely to occur in the long run without the loss of the republic in some fundamental ways. This is what I consider to be Armageddon.

The loss of the republic in the United States of America would be a worldwide disaster. (In the long run. The short run (meaning a generation or two) would actually benefit the economy of both) The loss of our republic is much closer today than ever before. Many reasons for this and most of them are economic. The rest are human nature. Just look at what is happening in Europe, particularly in England and Greece. If things become bad enough, martial law may be required. After all, extreme situations call for extreme measures. And hyperinflation IS an extreme situation.

The downgrade of American debt is a natural reaction to the national balance sheet. We already have so much debt in relation to GDP that additional debt becomes more risky. It only makes sense to charge more for additional loans to someone who already has a serious debt problem. Eventually, the risk is so great that ANY loan is foolish to make. At the phase we are in today, any higher interest payment is an additional tax on our economy without ANY benefit to us whatsoever. At least with something like unemployment, we can expect that money to be spent within our own economy. This interest on the debt is just GONE. Once you reach a certain point, (What that point is can only be guessed at) massive inflation MUST result. And this can explode without warning and usually does. I would expect open warfare to explode somewhere on the planet within the next few years. I am not referring to numerous small wars. These will become regional if not worldwide within a short period of time. Loss of the republic can easily be expected beginning around this time. I consider this another form of Armageddon. Even though the short run of a few generations will benefit, absolute power does corrupt absolutely. If we can push this off another generation or two, is it not worth the effort? Why speed it up?

These economic ‘crisis’ are real. They are occurring more frequently today. It can only be a relatively short time before we take action, or some event in and of itself minor can set off a snowball that will be out of control. I would expect war to break out not long after. Potentially a real Armageddon depending upon how you define Armageddon and how extreme the situation becomes.

1 comment:

  1. I agree that we are in trouble but for very different reasons than you. The US ability to get loans improved after the S&P downgrade. In fact it went negative. People around the world flocked to US treasuries, because there is no where else to go. The problem is not short term it is long term. We are only at 80% GDP. Eisenhower spend money like mad in 1951 when we were at 120% GDP. Invest, plan long term and stick to the plan. The reason we are in trouble is because politicians don't look past the next election (or news cycle really) and corporations don't look much past the next quarters earnings.

    I do enjoy the term "magic" in reference to the market. I am not a big fan of magic, I prefer facts and planning.

    I also find it very interesting that republicans of the last 40 years or so have really focused on "magic." Both in their beliefs in things not proven, like cutting taxes increasing tax revenues and their dire religious affiliations. The two in tandem explain a lot about their belief in "magic."